Brazil ETF tries to play catch-up

By John Spence

iShares MSCI Brazil (EWZ) was seeing a bit of action in Friday’s premarket at the end of a slow week for trading. The ETF has gotten a little bounce recently and looks like it’s probing the $72 level it touched briefly in early August. The Brazilian-stock fund fell sharply in April after topping around $75.

The Brazil ETF hasn’t been able to break out like ECH, its ETF rival that follows Chile’s market.

Brazilian stocks rose Thursday after tame inflation data had investors hoping the country’s central bank won’t raise interest rates. EWZ has been getting a boost recently from strength in the Brazilian real against the dollar. But investing in emerging markets ETFs can be a wild ride.

“These currency effects do increase the volatility of this fund … EWZ is about 100% more volatile than the S&P 500,” said Patricia Oey at Morningstar in an analyst report on the ETF. She added a rising middle class and global demand for commodities has boosted Brazil’s stock market in recent years.

Brazil is the world’s fifth-largest country and is often a major component in emerging markets and so-called BRIC ETFs.

Like the Brazil ETF, the broader iShares MSCI Emerging Markets (EEM) looks to be rising to test its summer highs from early August. It will be interesting to see if EWZ and EEM can catch up with some of the single-country emerging markets ETFs that have broken out recently.